Lawsikho Blog

What is an exclusive vendor agreement? How is it drafted? Is it exclusive? What clauses should be included in this agreement? If these questions arise in your mind too, you have come to the right spot. If you are a corporate lawyer or a start-up owner, this guide will come in handy.  

Introduction

In the heart of Mumbai’s indie business scene, Layla Kapoor had finally made it. After two years of hustle and homemade batches in her kitchen, her vegan skincare line — “Organica” — was on the shelves of stores from Bandra’s Turner Road to Telangana. Her bestsellers? The rice and rose enzyme cleanser and kakadu plum glow serum, both regarded and wildly popular for their subtle scents and organic formulations.

But behind Organica’s success was one quietly powerful alliance- Dr. Softskin Labs, a supplier of cruelty-free, plant-based emulsifiers and active ingredients based in Pune. Layla had met their founder, Guru Rajan, at a business expo two years ago. At the outset, both Layla and Guru were pretty aligned in their values and approach. Based on this rapport, no formal contracts were signed, just a mutual understanding, several emails and a consistent supply of exclusivity. Layla would purchase in bulk, but Guru would not supply the same base formulations to any direct competitor.

It was an understanding and an unspoken pact: one of trust, integrity, and growth.

One morning, Layla was sipping her double espresso at a café when her manager barged in. “You need to see this.”

It was an Instagram ad for a new brand called “Bloom Naturals”. Their featured product? A “Saffron Dew Elixir” with the same base, the same texture, and Layla knew instinctively it was the same Dr. Softskin Labs ingredients.

She bought a bottle. She ran lab comparisons. Same batch code signature. Same emulsifier ratios. Guru had betrayed her trust.

Her sales dropped within a month. Retailers started dropping her line, saying Bloom Naturals had better margins and aggressive marketing. The influencer circuit moved on. Layla’s dream was falling apart.

Throughout this, she stood bravely. She picked up her phone and called me.

When Layla explained everything to me, I asked her a one simple question:

“Did you sign a vendor agreement?”

“No. But I have emails. Messages. Purchase orders. Even a voice note where Guru assured me and said that, ‘You’ll be the only one with this formula.’”

“Okay. We have a case. Breach of implied exclusivity. Let us play it smart.”

The matter proceeded for arbitration, where Layla presented every piece of communication and evidence. Though the lack of a written contract weakened her stance, the tribunal recognised the implied exclusivity and awarded her partial damages. It was not a complete win but enough for her to recover and rebuild.

Layla learnt it the hard way. 

From that moment on, Layla never appointed a vendor without a watertight agreement. Every deal, no matter how friendly or promising, came with signed terms — exclusivity, supply timelines, dispute resolution, everything. She no longer relied on good faith; she only relied on meticulously prepared agreements. 

What are the points to be considered before executing an exclusive vendor agreement? 

Perhaps, many entrepreneurs will tell you that success in business is not just about landing the best price, but it is largely about finding a long-term partner who aligns with your vision, matches your growth, and safeguards the unique value your brand offers. In those crucial early stages, there is no place for unpredictable suppliers. So, before you commit to any agreement, here is a roadmap to help you select and collaborate with the right vendor—strategically and smartly.

1. Define your critical needs

• Focus on what is truly essential for your core products
• Determine realistic order volumes that will not strain your cash flow
• Estimate how your needs will scale year on year. 
• Define the minimum quality standards you can accept

Let us take an example. 

Organica is launching a natural lip balm brand. Your core ingredient is cold-pressed rosehip oil. Instead of asking vendors for a long list of oils and butters, you identify rosehip oil, beeswax, and shea butter as your non-negotiables. You calculate that your launch needs only 15 kg of each, and more than that will be heavy on your working capital. For quality, you specify that the rosehip oil must be organic, cold-pressed, and have a certificate of origin. This clarity not only helps you sort out incompatible suppliers but also shows potential vendors that you know exactly what you are doing, even if you are just starting out.

2. Budget-conscious supplier research

• Network with skincare/cosmetic industry associations and forums 

Join ISCC (Indian Society of Cosmetic Chemists) or participate in online forums like Chemists Corner or The Indie Beauty Network. These platforms often share vetted supplier lists and industry referrals.

• Attend relevant business expos (even virtually) to meet potential suppliers

Attend CosmoTech Expo (India) or In-Cosmetics Global (virtual booths available). These expos showcase raw ingredient vendors, contract manufacturers, and packaging suppliers. Virtual events reduce travel costs but still offer supplier access.

• Identify suppliers through specialised B2B platforms

Use platforms like: RangeMe (for supplier discovery), Beautystreams (for trends and vetted global vendors), GreenPeople – For eco-conscious packaging suppliers. 

• If you are a start-up, look for more startup-friendly suppliers 

Some contract manufacturers specialise in startups by offering low minimum order quantities and flexible formulations. For instance, Vedic Cosmeceuticals (India) or Antrim Cosmetic Solutions (UK) are known to support indie beauty brands.

• Create a manageable list for deeper evaluation

Narrow down to 5 potential vendors per category (e.g., ingredients, packaging, manufacturing), then evaluate them using a table with metrics like: MOQ,
vegan certifications, price per unit, turnaround time, startup experience, and sample availability. 

MOQ or Minimum Order Quantity is commonly used in manufacturing, wholesale, and e-commerce to indicate the smallest amount of product a supplier is willing to sell.

3. Streamlined due diligence

• Test small quantities before committing

Instead of ordering 500 units of rosehip oil, order a sample batch (e.g., 100 ml) from a supplier on Indiamart or Avi Naturals to test stability, texture, and skin compatibility in your formulation.

• Confirm vegan, organic, and quality certifications

Ask the supplier for documentation like: COSMOS Organic or Ecocert for organic claims, Vegan Society certification or a self-declared no animal testing statement, ISO 22716 (GMP for cosmetics) for production quality standards.
Don’t just take labels at face value; request PDFs or certificate numbers.

• Speak with other small businesses that they have supplied

If a supplier claims they work with indie brands, ask for references or case studies. Then reach out to a brand on Instagram or LinkedIn and ask how their experience was with that supplier (response time, delays, consistency, etc.).

• Ensure they are compatible with your startup volume

A supplier may require a 5,000-unit minimum, which might be too high. Instead, look for partners that offer low MOQs, such as 100–500 units per SKU, like Auriga Research or Vive Cosmetics, who specialise in catering to startups.

• Look for suppliers offering favourable payment terms for startups 

Ask the supplier if they pay 30 or 45 days after delivery. Some startup-friendly suppliers will allow partial advance (e.g., 30%) and balance on dispatch or offer deferred payment after successful batch testing.

4. Relationship building

• Be honest about your startup status and growth plans
• Meet key contacts virtually or in person
• Help them understand your brand and values
• Ensure their approach aligns with your vegan and ethical standards
• Test how quickly they address questions and concerns

5. Negotiate startup-friendly terms

• Start with a smaller exclusivity scope that grows with your business

Offer exclusivity only in one region (e.g., India) for the first 12 months, with global rights subject to sales milestones.

• Tie increased commitments to your business growth

Agree to increase order volumes or territories only once monthly sales exceed ₹5 lakhs.

• Negotiate order minimums that scale up gradually

Start with 250 units per SKU and plan to increase to 1,000 units over 12 months.

• Seek volume-based discounts that kick in at achievable levels

Negotiate a 5% discount once quarterly volume crosses 5,000 units.

• Negotiate terms that work with your cash flow

Propose a 30% advance and 70% on delivery instead of a full upfront payment.

• Ensure you can terminate if your business needs change structurally 

Include a 30-day exit clause without penalties in case you pivot your product or supplier needs.

6. Low-cost legal protection

• Start with a template and customise 

Use a standard supplier agreement template from a trusted legal resource and adjust key sections for your business.

• Pay for expert review of just the most critical sections

Hire a freelance lawyer to review only the IP, liability, exclusivity, and termination clauses.

• Address the highest-risk areas first

Prioritise IP ownership, product liability, and delivery delay penalties.  

• Ensure your formulations and brand concepts remain yours

Include a clause stating that all formulas and creative concepts provided by you remain your exclusive intellectual property.

7. Risk management for startups

• Request a probationary period before full exclusivity takes effect

Begin with a 3-month trial before entering a 1-year exclusivity agreement.

• Define clear, measurable supplier performance standards

Set key performance indicators like 95% on-time delivery and no more than 2% defect rate per batch.

• Establish affordable but effective testing protocols

Use simple ph, microbial, and stability testing at an independent lab for each formulation batch.

• Secure commitments on availability and lead times

Include a clause requiring a 2-week lead time for reorders with buffer stock options.

• Include provisions for supply interruptions

Define backup plans and allow temporary sourcing from alternatives if delays exceed 10 days.

• Address what happens if either business is acquired

Add a clause stating that the agreement will be reviewed and possibly renegotiated if either party is acquired or undergoes significant restructuring.

8. Lean implementation planning

• Plan straightforward ordering and delivery processes

Use a shared Google Sheet or a simple order form template to manage POs and delivery tracking.

• Focus on essential record-keeping for compliance

Maintain batch logs, ingredient sourcing documents, and product testing reports in a shared drive.

• Establish primary contacts on both sides

Assign one operations lead from your team and one from the supplier to avoid communication gaps.

• Schedule periodic reviews of the relationship

Hold quarterly check-ins (virtually) to discuss what’s working, what’s not, and next steps.

• Create a simple system to address issues quickly

Set up a WhatsApp group or shared email alias for immediate escalation of urgent concerns.

9. Startup-specific considerations

• Consider how this agreement might affect future investment rounds

Ensure contracts assign IP to your company and avoid long-term lock-ins that could deter investors.

• Ensure the agreement can grow with your business

Use add-on Statements of Work (SOWs) to expand the scope without renegotiating the entire agreement.

• Keep founders engaged in the relationship management

Assign a co-founder to be the relationship lead, especially for suppliers of core products or ingredients.

• Document processes so you are not dependent on one person

Ask suppliers to share standard operating procedures and maintain a central record of contracts, POs, testing reports, and contact details.

• Balance quality requirements with your limited budget

Focus on testing essentials (stability, pH, microbial), use affordable labs, and rely on supplier certifications to save costs in the early stages.

What were the points of negotiations between and the new supplier? 

Good things take time. 

After several weeks of intense research (keeping in mind the aforesaid pointers), Layla shortlisted a promising supplier, Veda Cosmeteuticals Pvt. Ltd. (“the Supplier”),  known for their startup-friendly approach and offering plant-based, cruelty-free formulations. From day one, she approached the negotiation transparently, sharing her startup’s vision, product roadmap, and projected growth over the next 12 months. This helped the supplier understand not just the immediate order, but the potential long-term relationship.

1. Transparency and trust-building

Laila was upfront about her budget constraints, current production scale, and the need for flexibility. She communicated that while initial volumes were modest, the brand had plans to expand into markets. In response, the supplier assigned a dedicated account manager and agreed to a video call to better understand Laila’s values and product requirements, including her strict vegan and ethical sourcing standards.

2. Negotiating key terms

Rather than jumping into a full-scale production contract, Laila proposed a 3-month probationary phase. During this period, they would work together on limited batches to test product quality, communication speed, and logistics. The supplier appreciated this practical approach and agreed to defer any long-term exclusivity until the trial period was complete.

They negotiated the following key terms:

• Low MOQs (Minimum Order Quantities) starting at 250 units per SKU.
• A 30/70 payment structure (30% advance, 70% upon delivery), aligned with Laila’s cash flow cycle.
• A 2-tier discount model, where pricing would improve once she crossed 5,000 units in quarterly volume.
• Performance expectations include 95% on-time delivery and less than 2% defect rate per batch.
• Clauses allowing termination with 30 days’ notice if the business needs change drastically.

3. Legal and IP considerations

Laila used a contract template tailored for Indian startups and hired me to review just the critical clauses: intellectual property, exclusivity, and delivery terms. She ensured that all formulations and branding ideas remained the property of her startup.

4. Final agreement

After two rounds of negotiation and document edits, both parties signed an agreement that was lean but surely scalable. It contained provisions for quarterly reviews, flexible scaling of order volumes, and clear expectations for communication and quality. Both sides agreed to revisit the terms in six months, once Laila’s brand had more traction.

This collaborative and pragmatic negotiation process helped Laila secure a supportive supplier relationship while protecting her startup’s flexibility and long-term interests.

How to draft the exclusive vendor’s agreement?

After careful deliberations on the aforesaid points, an exclusive vendor’s agreement was prepared. In this section, let us learn more about how it is drafted. 

You begin by mentioning the date and place of the agreement. The date confirms when the agreement commences, and the place determines which jurisdiction to apply.  

Now come to identifying and describing parties- whether it is a registered entity, if yes, under which legislation and its registered address. If either party is a company, be sure to include a clause referencing their successors and assigns. Including this simple sentence can save you from significant legal complications if things go south. 

THIS AGREEMENT (“Agreement”) is made on [insert date and year] at [place where the agreement was executed]

BETWEEN

Organica Pvt. Ltd. incorporated under the provisions of Companies Act 2013 and having its its registered office address at 201, Business Center, Nerul, Navi Mumbai- 400 100 (which expression shall unless it be repugnant hereinafter referred to as “the Vendor” to the context or meaning thereof shall be deemed to mean and include its successors and assigns) of the ONE PART;

AND

Veda Cosmeteuticals Pvt. Ltd., incorporated under the provisions of Companies Act 2013 and having its its registered office address at 202, WorkSpace Center, Nerul, Navi Mumbai- 400 100 (which expression shall unless it be repugnant hereinafter referred to as “the Supplier” to the context or meaning thereof shall be deemed to mean and include its successors and assigns) of the ONE PART

WHEREAS

This section is called “recitals of an agreement”. Recitals clarify why the agreement exists and what both sides aim to achieve. This, in turn, makes the rest of the contract easier to understand and enforce.

1. Organica India Pvt. Ltd. is a startup vegan skincare brand engaged in the business of manufacturing, marketing and selling ethical, plant-based, cruelty-free beauty products that promote both skin health and environmental sustainability; and
2. Veda Cosmeteuticals Pvt. Ltd. is engaged in the business of manufacturing and supplying cosmetic ingredients and finished products with expertise in creating vegan, cruelty-free formulations that match international quality standards, possessing the technical capabilities, certifications, and production facilities necessary for developing and manufacturing premium skincare products.
3. The Vendor seeks to engage the Supplier as an exclusive vendor for the development and supply of certain skincare products and ingredients, and Veda is willing to supply the same, in accordance with the terms and conditions set forth herein.
4. In consideration of the mutual promises and covenants contained herein, the parties agree to enter into this Agreement to establish a collaborative, scalable, and ethically aligned vendor relationship.

NOW THIS AGREEMENT WITNESSETH AND IT IS HEREBY MUTUALLY AGREED UPON BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS

1. DEFINITIONS

A definition clause gives an explanation and interpretation of particular terms in an agreement. 

So when a term is defined in this agreement, make sure you consistently capitalise it throughout the document. 

2. SCOPE AND PURPOSE

This clause creates and protects boundaries. With this, both parties know what they should expect out of each other. 

1. The purpose of this Agreement is to formalise the terms under which the Supplier shall develop, manufacture, and supply certain skincare products and/or cosmetic ingredients to the Vendor in accordance with the Vendor’s product specifications, ethical requirements, and business growth objectives.

 B. Scope of Work

The Vendor shall:

1. Develop and manufacture vegan, cruelty-free, and ethically sourced skincare ingredients as per the specifications provided by the Vendor in the Schedule stated hereunder;
2. Comply with all applicable quality certifications and regulatory standards, including but not limited to COSMOS, Ecocert, ISO 22716, and Vegan Society certifications;
3. Support low minimum order quantities (MOQs) and scalable production plans that align with the Vendor’s startup phase and growth projections;
4. Provide timely deliveries, batch documentation, and quality assurance reports;
5. Cooperate with the Vendor in product innovation, packaging development, and process improvements as may be mutually agreed upon from time to time.
6. Each party shall implement reasonable security measures to protect personal and confidential data shared under this Agreement and notify the other party within 24 hours of any data breach.

     C. Non-exclusivity during the trial period

The parties agree to an initial probationary period of three (3) months, during which this arrangement shall be non-exclusive. Upon successful completion of the trial period, and subject to satisfactory performance, the Supplier shall become the Vendor’s exclusive supplier for specified products, under mutually agreed terms.

3. PROBATIONARY PERIOD

This clause allows both parties to test the relationship on a small scale, assess product quality, communication, and reliability, without long-term commitment or exclusivity risk. It protects the startup from being locked in early and gives flexibility to pivot if things do not go as planned.

1. The first three (3) months following the effective date shall constitute a probationary period during which both parties will assess compatibility and performance.
2. During the probationary period:

1. All other terms of this Agreement shall apply, except for full exclusivity provisions.
2. Either party may terminate this Agreement with ten (10) days’ written notice. 
3. Both parties shall meet bi-weekly to evaluate progress and address any concerns
4. Upon successful completion of the probationary period, this Agreement shall automatically continue for the full Initial term, and the complete exclusivity provisions as per clause 4 shall take effect.

4. EXCLUSIVITY

This clause prevents the Supplier from working with direct competitors, while allowing exclusivity to grow as your sales grow. It ensures loyalty on both sides without overcommitting early.

1. Phased exclusivity: Following the probationary period, the Supplier agrees to the following exclusivity commitments:

1. Phase 1 (months 4-12): The Supplier shall not manufacture, supply or sell identical or substantially similar products to any competing vegan skincare brand operating in India. 
2. Phase 2 (month 13 onward): If the Vendor achieves monthly sales exceeding Rs. 5,00,000/-, exclusivity shall expand to include additional regions. 

2. Product exclusivity scope: This exclusivity applies specifically to the Products listed in Schedule A and substantially similar formulations.
3. Exceptions to exclusivity: The following exceptions apply:

• Products with at least a 30% difference in formulation from those in Schedule A
• Products supplied to brands targeting substantially different market segments
• Pre-existing supply relationships disclosed in Schedule B

4. Reciprocal commitment: The Vendor commits to sourcing the Products exclusively from the Supplier during the term of this Agreement, provided the Supplier maintains the quality standards and performance metrics outlined in Schedule C.

 5. ORDERING AND MINIMUM COMMITMENTS

This clause ensures that both parties can plan and scale production efficiently as the business grows. The scalable MOQs allow for manageable initial order sizes, with flexibility to increase as sales grow. The order process and forecasting enable better inventory and production planning, reducing delays and aligning supply with demand. This structure supports both growth and consistency while minimising risks.

1. Scalable minimum order quantities:

1. Initial MOQ: 300 units per SKU
2. Months 7-12: 600 units per SKU
3. Beyond month 12: 1200 units per SKU, subject to performance review

SKU or Stock Keeping Unit, which is a unique identifier assigned to a specific product or item in inventory, used to track stock, sales and logistics.

For example, if Organica sells a rosehip lip balm in three flavours, each flavour would have its own SKU.

2. Order Process:

1. The Vendor shall submit purchase orders via [specify method]
2. Orders shall be submitted at least 30 days before the requested delivery date
3. Supplier shall confirm receipt of orders within two (2) business days
4. Forecasting: The Vendor shall provide non-binding 3-month rolling forecasts to help the Supplier with production planning.

6. PRICING AND PAYMENT TERMS

This structure supports cash flow management, cost predictability and scalability for the startup. The 30/70 payment split gives Organica financial breathing room by avoiding full upfront payments. Volume-based pricing rewards growth and incentivises larger orders, while price stability protects the brand from sudden cost hikes, allowing better financial planning. Clear invoicing ensures transparency and smooth accounting.

1. Startup-friendly payment structure:

1. 30% advance payment upon order confirmation
2. 70% payment due within 30 days of delivery and acceptance

B. Volume-based pricing:

1. Base pricing as specified in Schedule A
2. 5% discount when quarterly volume exceeds 5,000 units
3. An additional 3% discount when the quarterly volume exceeds 10,000 units
   

C. Price Stability: Prices shall remain fixed for the first six (6) months. Any price adjustments thereafter must be:

1. Communicated in writing at least 60 days in advance
2. Limited to a maximum of 5% increase per annum
3. Supported by documented cost increases

D. Invoicing: Supplier shall issue clear, itemised invoices referencing applicable purchase order numbers.

   7. QUALITY AND SPECIFICATIONS

This clause safeguards Organica’s brand integrity and product quality, which are essential for consumer trust in a vegan, cruelty-free startup. It ensures the supplier aligns with ethical values, meets regulatory and quality standards, and provides certifications as proof. Clear procedures for testing, defect limits, and issue resolution reduce risk, support compliance, and help maintain consistent product performance and customer satisfaction.

1. Vegan and ethical standards: All Products must be:

1. 100% vegan (no animal-derived ingredients)
2. Cruelty-free (not tested on animals)
3. Free from prohibited ingredients listed in Schedule D
4. Produced using ethical sourcing practices

B. Certification Requirements: Supplier shall maintain and provide:

1. Vegan certification or self-declaration
2. Organic certifications were applicable (COSMOS, Ecocert, etc.)
3. ISO 22716 (GMP for cosmetics) documentation
4. Certificates of analysis for each batch

C. Quality Control:

1. The Vendor may test sample products before accepting delivery
2. Supplier shall conduct and document standard tests for stability, pH, and microbial safety
3. Defect rate shall not exceed 2% per batch

D. Quality Issues and Resolution:

1. The Vendor shall notify the Supplier of quality issues within five (5) business days of discovery
2. Supplier shall respond with a proposed resolution within three (3) business days
3. Supplier shall replace defective products at no additional cost

8. SUPPLY CHAIN AND DELIVERY

This clause ensures reliable and timely delivery, which is critical for a startup like Organica to maintain inventory flow, launch timelines, and customer satisfaction. It sets clear expectations for lead times and performance, provides contingency options in case of delays, and helps minimise business disruption through buffer stock and proactive communication.

1. Lead times and delivery:

1. Standard lead time: Two (2) weeks for repeat orders
2. Maximum lead time: Four (4) weeks for new Products
3. Delivery terms: _______

B. Performance standards:

1. 95% on-time delivery rate
2. Complete order fulfillment (no partial shipments without prior approval)
3. Proper documentation with each delivery

C. Supply interruptions:

1. Supplier shall notify the Vendor of potential delays within 24 hours
2. The Vendor may source from alternative suppliers if delays exceed 10 days
3. Supplier shall maintain a reasonable buffer stock of key ingredients

  9. TERMINATION

This clause provides clarity and flexibility around the duration and ending of the agreement. It ensures stability with automatic renewals but also protects both parties with clear exit options in case of breach, business changes, or insolvency. 

1. Initial term: Following the probationary period, this Agreement shall continue for twelve (12) months from the Effective Date.
2. Renewal: After the Initial Term, this Agreement shall automatically renew for successive twelve (12) month periods unless either party provides written notice of non-renewal at least 60 days prior to the end of the current term.
3. Early termination rights:

a. Either party may terminate with 30 days’ written notice if:

i. The other party breaches a material term and fails to cure within 15 days

            ii. The other party becomes insolvent or files for bankruptcy

2. The Vendor may terminate with 30 days’ notice if:

                 i. The Vendor’s business model changes significantly

                 ii.    Supplier fails to meet performance metrics for two consecutive quarters

4. Post-Termination Obligations:

1. Supplier shall fulfil all outstanding orders
2. The Vendor shall pay for all delivered Products
3. Both parties shall return or destroy confidential information

 10. INTELLECTUAL PROPERTY AND CONFIDENTIALITY

This clause is essential to protect the intellectual property and trade secrets of both parties. It ensures that Organica retains ownership of its brand assets and formulations, while Veda keeps control over its proprietary production techniques. Confidentiality provisions prevent misuse or disclosure of sensitive business information, even after the agreement ends. It also fairly allocates rights in collaborative developments, ensuring the Vendor owns new IP, while allowing the Supplier to continue using methods it helped create.

1. Ownership:

1. All formulations, concepts, and creative assets provided by the Vendor remain it’s exclusive intellectual property
2. Supplier’s proprietary production methods remain Supplier’s intellectual property
3. Neither party shall use the other’s intellectual property without written permission

B. Confidentiality:

1. Both parties shall protect confidential information for three (3) years after termination
2. Confidential information includes formulations, pricing, customer data, and business strategies
3. Standard exclusions apply (public information, independently developed information, etc.)

C. Development Collaboration:

1. Any jointly developed formulations shall be owned by Brand
2. Supplier shall receive a royalty-free license to use production methods developed

11. RELATIONSHIP MANAGEMENT

1. Dedicated Contacts:

1. Vendor Contact: [NAME, TITLE, CONTACT INFO]
2. Supplier Contact: [NAME, TITLE, CONTACT INFO]

B. Regular Reviews:

1. Quarterly business reviews to discuss performance, growth, and opportunities
2. Monthly quality and supply chain reviews during the first six (6) months

C. Issue Resolution Process:

1. Operational issues: resolved between operational contacts within 48 hours
2. Strategic issues: escalated to management with resolution within seven (7) business days
3. Urgent concerns: immediate notification via [SPECIFIED CHANNEL]

12. BUSINESS CONTINUITY AND GROWTH PLANNING

This clause ensures operational transparency, preparedness, and adaptability as the partnership grows. Requiring documentation and record-keeping supports compliance and continuity. Advance notice for capacity constraints or order spikes helps both parties plan and allocate resources effectively. Notifications of major business changes allow each party to assess risks and adjust the agreement or relationship if needed, safeguarding stability and trust.

1. Documentation:

1. Supplier shall provide standard operating procedures for Product production
2. Both parties shall maintain records of all transactions, quality tests, and communications

B. Growth Accommodation:

1. Capacity planning discussions shall occur quarterly
2. Supplier shall provide 90 days’ notice of any capacity constraints
3. The Vendor shall provide 90 days’ notice of significant volume increases (>50%)

C. Business Changes:

1. Either party shall notify the other within 30 days of:

i. Change in ownership or control

ii. Significant leadership changes

iii. Material business restructuring

4. Agreement Expansion:

1. New Products may be added through Statements of Work (SOWs)
2. SOWs shall reference this Agreement and include specific requirements

13. FORCE MAJEURE

This clause protects both parties from liability if they are unable to fulfil their contractual obligations due to extraordinary, unforeseeable events beyond their control.

Neither party shall be held liable for any failure or delay in the performance of its obligations under this Agreement (except for payment obligations) if such failure or delay is caused by events beyond its reasonable control, including but not limited to:

• Acts of God (such as floods, earthquakes, or pandemics)
• War, terrorism, or civil unrest
• Fire, explosion, or other physical disasters
• Governmental actions or restrictions
• Supply chain disruptions due to global or regional crises
• Labor strikes or lockouts
• Failure of suppliers or subcontractors due to any of the above causes

The affected party shall notify the other party in writing within five (5) business days of the occurrence of such an event and shall use all reasonable efforts to resume performance as soon as practicable.

If the Force Majeure event continues for more than thirty (30) consecutive days, either party may terminate this Agreement upon written notice without further liability, except for obligations already incurred.

14. INDEMNIFICATION 

This clause protects both parties from legal and financial risks. Supplier covers product defects, the Vendor covers false marketing claims, neither is liable for indirect or extreme losses. It ensures fair responsibility and limits exposure.

1. The Supplier shall indemnify and hold harmless the Vendor against any third-party claims, damages, or liabilities arising out of or related to defects in the Products supplied under this Agreement.
2. The Vendor shall indemnify and hold harmless the Supplier against any third-party claims, damages, or liabilities arising from the Vendor’s marketing claims or promotional activities related to the Products. 
3. Neither party shall be liable to the other for any indirect, incidental, special, or consequential damages, including loss of profit or business opportunity.

15. AGREEMENT TO BE EXECUTED IN DUPLICATE

This shall ensure that both parties have original agreements. 

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and the said counterparts shall together constitute this Agreement.

16. ARBITRATION

Clients usually prefer judges who “speak the language of their dispute”. In technical agreements, such as this, arbitration allows the parties to appoint an arbitrator with relevant technical expertise, someone who can quickly grasp and assess the nuances of the matter. This is a key reason why parties often choose arbitration.

Any dispute, controversy, or claim arising out of or in connection with this Agreement, including its interpretation, breach, termination or validity, shall be referred to and finally resolved by arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996, as amended from time to time.

The arbitration shall be conducted by a sole arbitrator, mutually appointed by the parties. If the parties are unable to agree on an arbitrator within 30 days of a dispute being notified, the arbitrator shall be appointed in accordance with the Act.

The seat and venue of arbitration shall be Mumbai, and the proceedings shall be conducted in English.

The arbitral award shall be final and binding on both parties and enforceable in any court of competent jurisdiction in India. Each party shall bear its own costs, and the arbitrator’s fees shall be shared equally, unless otherwise directed by the arbitrator.

17. JURISDICTION 

To avoid confusion with respect to the seat and venue of arbitration, the parties hereby agree to approach the courts in Mumbai whenever court intervention is needed. 

Courts at Mumbai alone shall have jurisdiction over all matters arising out of, concerning with or touching upon this Agreement to the exclusion of all other courts.

18. NOTICES

This clause clearly defines how, when, and to whom official communications (like termination, breach notices, or updates) must be sent between the parties.

Any notice or other communication of like nature that may be given by one party to the other shall always be in writing in English/Hindi/Marathi language and shall be served by hand delivery, duly acknowledged or sent by Registered Post with acknowledgement due or through electronic mode. Any such communication shall be deemed to have been served when sent by Registered Post when the same is actually received by the addressee. There shall be deemed acceptance of the communication in case of refusal/evasion of service of the communication.

19. ADDRESSES OF THE PARTIES 

State the addresses for delivery of notice or such other communication. 

VENDOR

(Address of the Vendor)

SUPPLIER

(Address of the Supplier)

20. NO WAIVER

The purpose of this clause is to protect both parties by making clear that a delay or failure to act does not equal giving up legal rights, allowing them to enforce the agreement later if needed.

The waiver or failure of either party to exercise any right in any respect provided in this Agreement shall not be deemed a waiver of any other right or remedy to which the party may be entitled. 

21. ENTIRETY OF AGREEMENT

This clause ensures that only what is written in the agreement is legally binding, overriding any prior discussions or informal understandings. 

The terms and conditions set forth herein constitute the entire agreement between the parties and supersede any communications or previous agreements with respect to the subject matter of this Agreement. There is no written or oral understanding directly or indirectly related to this Agreement that is not set forth herein. No change can be made to this Agreement other than in writing and signed by both parties.

22. LEGAL CHARGES

It is in the best interest of both parties that an understanding with respect to legal charges is recorded. 

Each Party shall bear and pay its legal charges. 

23. GOVERNING LAW

This is very much relevant when the transactions are cross-border or interstate. This clause ensures clarity by specifying which country’s laws apply and which courts will handle any disputes.

This Agreement shall be governed by and construed in accordance with the laws of India. The parties agree that any disputes arising under or in connection with this Agreement shall be subject to the exclusive jurisdiction of the courts located in Mumbai. 

Legal terms, along with the technical details may not be a good read. Thus, it is smarter to put the technical details in a separate schedule altogether. A schedule in an agreement is needed to provide detailed, structured and easily referable information that supports or supplements the main terms of the contract. 

SCHEDULE A: PRODUCTS AND PRICING

[List all products, specifications, and base pricing]

SCHEDULE B: PRE-EXISTING SUPPLY RELATIONSHIPS

[For the sake of disclosure, supplier to list any pre-existing relationships with potential competitors]

SCHEDULE C: PERFORMANCE METRICS

[State the standard of measurement used to assess effectiveness, efficiency and quality of performance such as on time delivery date, quality defect rate, customer satisfaction rate, etc.]

SCHEDULE D: PROHIBITED INGREDIENTS

[The Vendor being a vegan brand, taking this into consideration, give a list of ingredients which strictly cannot be used in any formulations.]

IN WITNESS WHEREOF, the parties herein have hereunto set and subscribed their respective hands at written.

THE COMMON SEAL of the within-named

“THE VENDOR”

was hereunto affixed pursuant to

The Resolution of its Board of Directors [insert date of the resolution]

Passed on that behalf on ____

Day of ____ 2025 by its Director in the presence of

1. [Names and signatures of witnesses] 
2. [Names and signatures of witnesses]

THE COMMON SEAL of the within-named

“THE SUPPLIER”

was hereunto affixed pursuant to

The resolution of its Board of Directors 

[insert date of the resolutions]

Passed on that behalf on ____

Day of ____ 2025 by its Director in the presence of

1. [Names and signatures of witness] 
2. [Names and signatures of witness]

Final thoughts

In conclusion, drafting a comprehensive and well-structured exclusive vendor agreement is a crucial step in fostering long-term, successful business relationships. By setting clear terms on exclusivity, quality standards, payment structures, and performance metrics, both parties can align their expectations and minimise potential conflicts. Incorporating probationary periods, scalable terms, and exit clauses ensures flexibility as the business evolves. Regular communication, performance reviews, and strong intellectual property protections further secure the interests of both the vendor and supplier. Ultimately, a thoughtful agreement not only prevents business breakups but also paves the way for sustainable growth and mutual success, making it an essential tool for startups and established businesses alike.

FAQs

1. How can I negotiate favourable terms for a startup in an exclusive vendor agreement?
   Startups can negotiate favourable terms by:

• Ask for flexible minimum order quantities 
• Seek extended payment terms (e.g., 30% upfront, 70% upon delivery)
• Request volume-based discounts or pricing adjustments based on growth
• Seek trial periods (such as a 3-month probationary period) before committing to long-term exclusivity. 

2. What if my business model changes during the term of the exclusive agreement?
   In such a scenario, you can have a clause that specifies the process for terminating or renegotiating the agreement if there are material changes in your business needs or model.
3. How do I handle supplier disputes in an exclusive vendor agreement?
   Have a dispute resolution clause in your agreement, specifying:

• Mediation or arbitration as the first step before litigation
  
• The governing law (jurisdiction) for any legal disputes
  
• A process for resolving issues without disrupting the business relationship, such as regular meetings or performance reviews

4. What is a probationary period, and why is it important in an exclusive vendor agreement?
   A probationary period is a defined time (e.g., 3 months) during which the vendor and supplier assess their compatibility and performance. It’s important because it allows both parties to evaluate the working relationship, address any issues, and decide if they want to move forward with full exclusivity without long-term commitments.
5. Can I include performance metrics in my exclusive vendor agreement?
   Yes, you should! Performance metrics help ensure both parties meet expectations and are held accountable. Metrics might include:

• On-time delivery rates
  
• Product quality standards (e.g., defect rates)
  
• Customer satisfaction ratings
  
• Volume-based performance incentives

6. How can I ensure the agreement is scalable as my business grows?
   Ensure scalability by including clauses that allow for:

• Gradual increases in MOQs over time
  
• Volume-based pricing or discounts as sales grow
  
• The flexibility to add new products to the agreement without renegotiating everything
  

7. What role does sustainability play in drafting an exclusive vendor agreement?
   Sustainability clauses should reflect your brand’s ethical standards, especially for eco-conscious businesses. You can specify:

• Use of sustainable materials
  
• Ethical sourcing practices
  
• Waste management and carbon footprint reduction initiatives
  
• Certification requirements (e.g., fair trade, organic, cruelty-free)
  

8. Can I add a clause for exclusivity that only applies to certain products or regions?
   Yes, exclusivity can be customised to apply only to specific products, regions, or market segments. For example, you could restrict exclusivity to one product line or only in the domestic market, allowing flexibility for other products or international markets.
9. What happens if my supplier faces business disruptions (e.g., a supply chain issue or a natural disaster)?
   You can include a “force majeure” clause to protect both parties. This clause outlines protection and lays down responsibilities if unforeseen events (like natural disasters, pandemics, or supply chain disruptions) prevent the supplier from fulfilling their obligations. It may grant temporary extensions or allow for alternative sourcing.